Easy Ways To Improve Your Credit Score

From playing the lottery to working overtime, many Americans are constantly seeking ways to make more money. One of the most overlooked secrets to increasing your income is maintaining a good credit score.

“It’s a hard concept to wrap our minds around, but establishing good credit is the first step to building wealth,” says Ramit Sethi, author of the new book, “I Will Teach You To Be Rich.”

“Our largest purchases are almost always made on credit, so people with good credit save thousands of dollars in interest over the years,” says Sethi. “Credit has a far greater impact on your finances than saving a few dollars a day on a cup of coffee.”

Here are some easy tips for improving your credit score:

Pay your bill on time and in full. Yes, we’ve all heard it, but it’s a tried and true method for a reason. With your payment history representing 35 percent of your credit score, it’s the single most important thing you can do to improve your credit score.

Get all fees waived on your cards. Call the number on the back of your credit card to ask if you’re being charged any annual or hidden fees. Ask for those fees to be waived. It may sound audacious, but with so many no-fee credit cards out there, it behooves credit card companies to waive these fees to keep your business.

Negotiate a lower APR. Your annual percentage rate (APR) is the interest rate on your credit card for outstanding balances, and the average is a whopping 14 percent. It’s worth calling to ask if a card company will offer you a better deal. If they ask why, tell them you’ve been paying your bills on time and would like to stick with them instead of switching to another company.

Keep your card active and open for a long time. Lenders like to see a long history of credit, so your credit score improves the longer you keep any existing cards open. Some credit card companies cancel your account after a period of inactivity, so you may want to tie those cards to monthly expenses like your phone bill.

Increase your credit utilization rate. Your credit utilization rate is the ratio between the amount you owe over your total available credit, and makes up 30 percent of your credit score. Therefore, the first step to improving your utilization rate is to stop carrying debt on your card.

Once you’ve gotten into the habit of paying off your entire bill each month, the second way to improve your utilization rate is to increase your available credit. For example, $500 owed when you have $5000 worth of available credit looks better than when you owe $500 out of a total $1000 worth of available credit.